ECONS 101

FACTORS OF PRODUCTION

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Factors of Production refer to Agents, Components or resources which are combined together to produce goods and services. There are four factors of production namely:

a.     Land                                                                                     

b.     Labour

c.      Capital

d.     Entrepreneur

LAND

Land is defined in economics as a free gift of nature, it does not only include the land surface but all other free gifts of nature and natural resources like forest, mineral resources, rivers etc. The supply of land is unlimited unlike other factors of production. The reward for land is RENT.

Characteristics of Land {Its Features}:

1.     Land is immobile, it can’t move from one place to another.

2.     The Supply of land is fixed, it is impossible for man to increase the quantity of land.

3.     Land is a free gift of Nature.

4.     Land is subject to diminishing returns, this happens when a land is frequently bought under cultivation, and it reduces its productivity.

5.     The quality and quantity of land varies from one place to another as well as its fertility.

6.     Land has no cost of production.

7.     The reward for Land is Rent.

Importance of Land:

1.     It is useful for Farming Purposes.

2.     Land is useful for livestock purposes.

3.     It is useful for Fishery purposes.

4.     It can be used as collateral security when one wants to collect loan from a bank. The Certificate of Occupancy ( C of O) is usually requested by the bank as collateral.

5.     It is useful for wildlife purposes.

6.     It is used for transportation purposes.

7.     It is used for residential purposes.

LAW OF DIMINISHING RETURNS.

This law states that as successive units of a variable factor (Labour, Capital etc) is applied to a given fixed factor (Land), output will increase at first but it will get to a point at which the addition of one more unit of the variable factor will result in less additional units of output. This Law can sometimes be called The Law of Variable Proportions. This is applicable to agriculture and industry because they both used fixed and variable factors of production.

Importance of Law of Diminishing Returns:

1.     It ensures efficiency.

2.     It enables change in scale of production.

3.     It aids proper combination of the factors of production.

LABOUR

Labour as a factor of production is defined as all forms of human efforts put into or utilized in production. It also refers to man’s mental and physical exertions generated in the process of production. Labour is the aggregate of all human and mental efforts used in the creation of goods and services. The Rewards for Labour as a Factor of Production comes in form of WAGES & SALARIES.

TYPES OF LABOUR

There are two main types of labour and they are:

1.     UNSKILLED LABOUR: This requires little or no formal education. They do not use mental effort; rather they use physical effort and energy in production. Hence their jobs are called BROWN COLLAR JOBS. As a result of their low level of education, with some kind of training, they are used as Cleaners, Gardeners, Guards, Messengers etc.

2.     SKILLED LABOUR:  This requires the use of mental effort in the production of goods and services. This labour undergoes relatively long and specialized type of training in higher institutions. They usually go for Managerial Positions, and end up as Engineers, Medical Doctor, Accountant etc. They are usually referred to as WHITE COLLAR JOBS.

CHARACTERISTICS OF LABOUR

1.     Labour is mobile that is it can move from one place to another.

2.     Labour is skillful, and it becomes so through education and training.

3.     Labour requires motivation for it to perform effectively.

4.     Labour is not predictable.

5.     Labour is not fixed unlike Land because it varies in quantity and quality.

6.     Labour controls other factors of production, to make them more meaningful in the society.

IMPORTANCE OF LABOUR

1.     Labour provides the required skill and personnel for production.

2.     Labour influences other factors of production.

3.     Labour is required in the operation of machines.

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